The safety net

From the American Enterprise Institute, an essay speaking exactly to what's been troubling me lately about the argument that we have to submit to mandatory entitlement programs because capitalism is too risky:
What used to be called "public charity" is now "entitlement programs."  The difference is much more than semantics.  The word "charity" carries with it the implication that the intended beneficiary is someone else.  Those who paid taxes to support such programs, approvingly or not, did so in the clear understanding that they were paying to help other people; they neither expected nor desired any personal benefit from the programs.  . . .
Gradually, however, the left inculcated the notion that we are all at risk, due to the nature of "capitalism" (i.e., freedom), and hence that government programs for those in need ought to be seen as a universal necessity.  In other words, such programs were no longer to be viewed as something the vast majority of citizens provide for the benefit of the very few, but rather as something government ought to be providing for each of us as a primary function.
As I read somewhere else today, the safety net is supposed to be a trampoline for the very few, not social flypaper for the many.  I've been arguing with Grim recently about the conflation of insurance with subsidies.  The distinction is critical:  Insurance is appropriate for most adults, but subsidies are not.  If the category of "needy citizens" expands to include a large fraction of Americans, or even (as is now becoming the norm) a majority of Americans, the category has lost its meaning and programs that address it have lost their justification for existence.

H/t Maggie's Farm.


Grim said...

I disagree with your conception that things like what we call 'unemployment insurance' -- even if we agree to call it something besides insurance -- constitute a subsidy (let alone charity). To me, it seems smart to have something like that in place given the nature of capitalism. If capitalism were really just "freedom," then 'protecting me from it' would be offensive. But it's not; capitalism is also "creative destruction."

As we've discussed, creative destruction provides a lot of great goods. I don't want to restrain it at all. I just think it's smart for a society that embraces capitalism to also have some handshake agreements about what we'll do if our way of making a living gets creatively destroyed. Things like unemployment insurance (or whatever) help us get all the benefits of creative destruction, without actually having to personally lose everything because you had the bad luck to be on the wrong side of that dynamic.

Since it can happen to anyone, in any industry -- changing technology makes it almost random, rather than something one can wisely plan to avoid -- it seems to me just sensible to have some basic protections in place.

Now, that said, when I've been unemployed I've never made use of any of the protections that exist. I've always relied on savings and, if those failed, on the credit history that I have so carefully maintained. These things allow me to absorb my own costs (another sensible precaution, and in keeping with the values I hold). So, as you have often said, I think we need a society that upholds the value of not taking public money.

But that's probably just me being stubborn, or else it's Merle Haggard talking to me.

E Hines said...

I just think it's smart for a society that embraces capitalism to also have some handshake agreements about what we'll do if our way of making a living gets creatively destroyed.

We do--it's called family, private charity, community. You think it's smart to have e.g., unemployment insurance. If it were truly insurance, it might be. But someone else--me, for instance--doesn't want even insurance. I like the odds the insurance company bets on that it won't have to pay off on the risk I'd be transferring in an insurance contract. I have other uses for that money than to spend on insurance. As you've just demonstrated, you're capable of not taking that bet, too.

But when government mandates it, it's not insurance. It's not even charity; it's just mandatory wealth redistribution--which is inherently immoral.

There's another critical difference between charity and government's mandated subsidy/wealth transfer. Stipulate it's for the same purpose and the same amount of money. When I, or T99, or you, or anyone else, satisfy our duty to help the less fortunate, we have three or more different ways to do that--ways that are most efficient because they suit our resources and imperatives best. When government does it, there's only one way--and it's not even the most efficient way, because it's one size fits all.

Eric Hines

Texan99 said...

I think we do have social agreements about what to do if our job skills become irrelevant or obsolete. We go get new jobs doing something else. Who says we're owed special compensation from society when that happens, unless we happen to be a hard-enough-luck case to warrant charity?

"Creative destruction" refers to dismantling failed enterprises instead of continuing to let them uselessly soak up resources. I don't see that it has much to do with creating a right of recourse in a worker who considers himself wronged when his job at a failed enterprise is "destroyed," as if a vandal did it. Is a plant owner entitled to restitution if all his workers run off to get better jobs across town or in the next state? That's a kind of creative destruction, too. A Job is not supposed to be a gig for life.

Or to put it another way, the mere fact that something disruptive happens doesn't create an entitlement. All of us experience disruptions of one kind or another, but most of us had better figure out how to weather them with our own resources, or there won't be enough to cover the real disasters that render people unable to care for themselves.

Grim said...

I didn't say anything about entitlements or rights to recourse. I'm talking about planning. We've got a known issue that causes a certain amount of disruption to members of our society. It's going to come up regularly, and that's fine: the cost/benefit analysis for capitalism is strongly in its favor in spite of the regular disruptions.

Still, we have the known issue and the problems it creates. We can plan for it.

I've done a fair amount of military planning: contingency planning, operational planning, strategic planning and so forth. When I see something like this, it strikes me as a place where we can set up a plan that will ameliorate most of the harm done.

Now you know I'm a 10th Amendment believer, so the "we" I mean is "Gerogia" or "Massachusetts." If the state should set up such a plan, you still have the right not to participate in it -- you can move to a state that doesn't do it. But it doesn't strike me as illegitimate to use the government to plan for known social ills, provided that such planning is coherent with the rights of the people.

Grim said...

By the way, Mr. Hines:'s just mandatory wealth redistribution--which is inherently immoral.

What's the argument for the inherent immorality here? Let's say we have a society of ten people. We agree by unanimous vote that we'll each chip in a hundred bucks once a year, and divide it among whichever three of us is poorest at the end of the year for Christmas -- so they can help cover his end of the communal hospitality, say.

That's not charity, since it's for a common good (two, actually: ensuring that we have excellent Christmas dinners to attend, and ensuring that we remain a strong and undivided community, with all members able to participate in these festivals). It is wealth redistribution, and once we've agreed to it, it becomes mandatory. Is it immoral?

Now what if the community is larger, so that every ten guys elects a representative to go make these deals for them? If he is duly elected and agrees to the deal, and then asks them to fork over the money, is that inherently immoral? If so, why?

E Hines said...


In the first case, it's not immoral at all; the group is small enough that they can control the "assessment," who the recipient(s) will be, and the method used.

At the state or national level, in a modern environment, though, as a practical matter, the group loses control over all three; the populations involved are too large. At that point, the men populating the government cease being responsive to their bosses--those who elect them. Instead, they now mandate the redistribution according to their own imperatives. To the extent the actual power is transferred, the men of government now are capping the success of some in favor of transferring to others a measure of that some's wealth. This destroys the equality of opportunity that both our social compact and a free market have at their core by denying those their right to maximize their opportunity's results. And it denies, by becoming a subsidy of entitlement rather than a temporary charitable hand up, the recipient's capacity to realize his own opportunity's potential. These are the inherent immoralities. And periodic elections are too ill-timed and have to fight the power of incumbency, and so lose effectivity in redressing the overstepping.

As to planning, without disputing the need for government planning, the planning needs first to be done by the individuals--whether that's buying actual insurance, self-insurance (e.g., savings), or some other method that suits the individual of amassing a measure of assets against the emergency. Or small groups pooling resources.

Grim said...

As to planning, then, I think we agree.

As to the other concept, it sounds like wealth distribution isn't inherently immoral after all: the immorality only arises when a certain political scale is lost.

'Getting the scale right' is a point we've discussed (especially me and Tex) several times, and you know I agree with it. A larger, more distant government seems to be a less legitimate government in several ways. I think there's a kind of natural law at work, where human nature is built around groups of maybe a couple of hundred people. Beyond that, organizations should be trusted with less and less practical power over individuals; but instead, of course, we tend to trust them with more and more.

So what's really inherently immoral, if I understand you, is the exercise of this power by a government of to great a scale. I could be sympathetic to that point.

Texan99 said...

"We can plan for it" -- we can plan for everything, but that doesn't argue that we should collectivize. We can plan that I'll get hungry every day for the rest of my life and cold in winter, but that doesn't mean it's a good idea for society to feed and house me. In the abstract, I agree we certainly could attend to needs that way. In practice, societies that collectivize inevitably impoverish themselves and lose the freedom that makes life worth living.

As for the argument that something could be made more or less moral because people vote for it in a representative democracy. I'm not persuaded. In any case, in your example, how does it start to look when six of the guys vote to sit on their butts while the other four do all the work? We can say it's moral because they all agreed to a representative democracy, but the system won't last long.

Grim said...

The difference in the two cases, Tex, is that your proposal really is inherently immoral: it's opposed to the principle that (as the Bible puts it) 'if a man will not work, neither shall he eat.' You can't make that moral by voting for it at any level.

Mr. Hines' case, though, is perfectly moral at one level; but it becomes immoral (on his account, which seems reasonable to me) at a certain scale of government.

That's an idea we already agree with: there are things it is proper for the state to do, that the Federal government should not have the power to do (e.g., having a general police power). There are other things it is proper for the Federal government to do that 'international governance' should not do -- the United Nations ought to have very limited actual power, and no international treaty should be able to abridge the liberties protected at the Federal level by the Bill of Rights.

I don't favor a 'collective' response per se; you're still going to have to do most of the work yourself even if I got my way. However, it would be a little easier for you. Losing your job would still be disruptive and unpleasant, and finding a new job could be quite stressful (especially in hard times like now, when there are very few new jobs to be had). However, you wouldn't be in peril of losing everything; at minimum, we'd make sure you had food and that you didn't lose your home for a certain period of time. I'd set that period at whatever the current average time was for job hunters of your level of education and experience to find work, with an additional period available if and only if you could document extensive job searching in the period.

In good times, that might only be a few weeks. In hard times, it would be longer. But think of it not as collectivism, but as protecting capitalism. The reason genuine socialistic approaches become popular is because people lose their jobs, and then lose everything else; even if it doesn't happen to them, just watching it happen to others in their neighborhoods makes them want to cage capitalism up. From the perspective of the poorest, who are most in danger and see it most often, capitalism can look like a wild beast. It can often ravage their lives, or the lives of those they care about. Being poor, there is less they can do to help those they care about.

That's why they often support these Leftist policies. But of course they are the ones most in need of capitalism, too. Some basic planning around these known issues is a good way to avoid having the bottom fifth of the country leaning permanently Left. It keeps them working, or looking for work. It ultimately makes the place of capitalism in our society stronger and more secure.

E Hines said...

...sounds like wealth distribution isn't inherently immoral after all: the immorality only arises when a certain political scale is lost.

Two things here. Wealth redistribution is inherently immoral. What small groups do isn't that, it's a voluntary pooling of resources to more efficiently provide a hand up to one or more of their fellows--or even to someone outside their little community. Such a hand up is inherently temporary and short-lived. Wealth redistribution as I understand its use generally, especially by government personnel and entities, is a permanent redistribution--and it's generally involuntary in all three of the aspects I outlined earlier in this thread.

Which brings me to my second point. It isn't scale that leads to the failure of the system; it's the usurpation of control over those three aspects. Scale certainly is a contributor, but T99's point about a bare majority imposing on the rest in your small community is valid.

It's just that in that small community, there's generally less interest in such an imposition--where some sort of super majority doesn't exist, a simple majority are going to be more cautious about their imposition. And that small community can more easily fragment on that issue, while still maintaining cohesiveness over (all?) other matters.

Moreover, the simple exercise of power by a (large) government isn't inherently immoral, although a large government finds it easier to immorally abuse that power. Only a government can exercise the power, for instance, to levy legitimate taxes, see to the national defense, and so on--which is why the Constitution was written to replace the Articles of Confederation. The short pole in this tent, and the greater source of the immorality, it seems to me, is less the government's overstepping than it is of a complacent population letting it do so.

Eric Hines

Texan99 said...

The states under our system have the power to do things the federal government does not, but not everything they have the power to do is right. They can and do implement many policies that will destroy the republic over time.

Grim, the system you're describing doesn't seem to take much account of savings. If there were no such things as savings, I could see why we'd need emergency corps to parachute in and provide food and utility money for three weeks or three months while someone looks for a new job. As it is, we already have a perfectly good mechanism for weathering that kind of completely common and expected disruption to family finances. In very hard luck cases, where people failed for whatever reason to save any money, cannot find a single job doing anything at all, and have no family or friends to help out, there should be charity to keep them from starvation.

There is no substitute for living within your means and saving up for emergencies. When we get to a point where we expect the government to handle that responsibility for most Americans, we're sunk.

Grim said...

That's all very well, and I don't disagree with the sentiment; but the price is things like labor unions and the poor bloc-voting for Leftists. In a Republic, unless you want to rethink your position on restricting the franchise (perhaps via a wealth test like the old 'property ownership' test the Founders used), you're setting yourself up for failure here.

If you want to narrowly tailor the program so that it applies only to the bottom 30%, say, that's fine; but remember that anyone who has lost his job has just moved into the "no income" category, and will be in the bottom 30%. If you want to narrowly tailor it to exclude people with adequate savings, that's just setting up a powerful disincentive to save.

What might make sense is to set it up to include only people with adequate savings, or who can show documentation of unavoidable emergencies that depleted what would have otherwise been adequate savings. That establishes a reinforcement mechanism for the virtue, in addition to the other positive effects.

E Hines said...

...with an additional period available if and only if....

But at what point would you accept that this is just a bailout, and not a hand up? We've already gone, in real time, from an original 13 weeks of unemployment insurance through myriad extensions to 99 weeks, so that today we're simply paying people not to work. This is also true of union unemployment funds and union contracts that enjoin employers to keep paying those that have been laid off. There are multiple studies that show that reemployment goes up sharply in the last 2-3 weeks before the insurance runs out. This is not to refute your principle but to argue its difficulty of government implementation.

Keep in mind, also, that while the Bible teaches working in order to eat, it also teaches that the help due the least is only the minimum required to survive. Boaz was quite generous to let Ruth glean in his wheat fields after his own harvesters had been through them--the more so since he enjoined his harvesters to do an especially careless job of harvesting this time to increase the gleanings available for Ruth. Even so, that's mere subsistence. Our current welfare systems are far more than that.

...anyone who has lost his job has just moved into the "no income" category, and will be in the bottom 30%.

The period should come after "category;" the rest does not follow, as the extreme case of my wife and me show. Moreover, we knew all the welfare tools available to us at the time we deliberately decided to tap our savings rather than use those tools. And most people will, given the chance; this is a matter of moral teaching, not human nature. My wife and I are not saints; our natures are quite typical.

Two things bear on this, though: one is the lack of moral teachings in our schools today, and the other is the highly addictive nature of welfare--it's just as addictive as any biological drug.

...narrowly tailor the program so that it applies only to the bottom 30%....

This assumes those [30%] are static, and the same people over time. In fact, in a free market with a minimalist government, economic mobility is quite high. Today's poor man is tomorrow's middle class family man. The sons and daughters of today's poor families are tomorrow's middle class. For the population, this is, necessarily, a zero sum game: the middle class mobility goes in both directions, and today's rich man is tomorrow's middle class--or poor. And given the asymmetric distribution of wealth, the bias to upward mobility extends into the upper middle class.

For instance, "Income Mobility in the U.S. from 1996 to 2005," a 2007 Treasury Dept report, notes that 80 percent of [US] taxpayers had incomes in quintiles as high or higher in 2005 than they did in 1996, and 45 percent of taxpayers not in the highest income quintile moved up at least one quintile.

With the increased dependency on government, though, in the US, that economic mobility is reduced.

Eric Hines

Grim said... what point would you accept that this is just a bailout, and not a hand up?

I think I answered that already: the period would be based on the average time it takes someone of that age, education and experience to find a job. If they need a second such period, they have to demonstrate that they're behind the curve; and if they're unable to do it in the second period, the aid would end.

As for the rest of what you say, I agree: it's the poor who need capitalism the most. However, they're also at special risks in terms of being able to provide adequate savings, and of being turned out of their jobs (one reason you are likely to be poor is that you are unskilled; but because you are poor, you are less able to afford to attend a technical school that would teach skills).

We want the capitalist system to work for everybody, and sometimes it doesn't. A little planning, though, can make it more likely to work for more people, with less disruption from the necessary 'creative destruction.' The reason to do this is only partially because it's humane; it's just as important because it secures the place of capitalism in our society, especially for the poorest who need it the most.

A system like this is very different from permanent welfare of the type you're worried about. It is designed to help people who lose jobs find new jobs, and keeps them in the market. If we adopt the 'only with evidence of savings' approach, it even reinforces the moral code that a free citizenry requires.

Which means that if you're right about this:

And most people will, given the chance; this is a matter of moral teaching, not human nature.

...then here's a mode for teaching and training people in the right direction.

E Hines said...

...if they're unable to do it in the second period, the aid would end.

This part wasn't clear in your original construction. And it's the point of failure when a government does it--for which I have no viable alternative, yet, other than the emphasis of government being the last resort rather than the first.

After all, the original 13 weeks of unemployment payments didn't even have your backup period; the payments just stopped after those 13 weeks. But a government populated by a mix of well-intended folks and others bent on buying power with bread and circuses just added an additional period for the poor unfortunates. And then another. And another. And....

And a government populated by a mix of well-intended folks and others bent on buying power with bread and circuses gave us Obamacare.

And so on.

Governments find it very hard to leave things alone, even when that's optimal. Harding did with the depression of the early '20s. No government since has, even with their miserable track records, especially plain when set beside Harding's results.

Eric Hines

Texan99 said...

"We want the capitalist system to work for everybody, and sometimes it doesn't."

Depends what you mean by work, I guess. I never expected capitalism to provide a guaranteed living to anyone. That's why i think charity is necessity. Some people will be disabled, others supremely unlucky, or the combination of the two that we call "feckless." But there's a big difference between charity and entitlements, and it's summed up well in your concern that making unemployment benefits contingent on a lack of savings will be a powerful disincentive to save.